All of the problems here pertain to an economy with three future states (Boom, Stagnant, and Recession) with three securities (a market index, a risk-free security, and a put option on the market index with a strike at $200.00). The put option expires one year from today, which is also the same time horizon for the table below.

3.

Firm ABC state contingent cash flows:

Future Economy	Event 1 (Probability 20%)	Event 2 (Probability 50%)	Event 3 (Probability 30%)
Boom	$6,000,000.00	$3,000,000.00	$2,000,000.00
Stagnant	$2,750,000.00	$3,500,000.00	$2,500,000.00
Recession	$1,500,000.00	$2,500,000.00	$3,000,000.00

a) What are the mean-zero cash flows for Events 1, 2, and 3 for each state of the economy?

b) Find the holdings for the tracking portfolio for the firm.

c) Find the value of the firm.